Krugman on Kalecki … and Marx

If you read the interview with Bob Pollin in our current issue, Beyond Debt and Growth, then you saw the little sidebar we had about Polish Marxist economist Michal Kalecki. Here it is:

The Legacy of Michal Kalecki

Michal Kalecki (1899–1970) was a Marxist economist, a scholar at Cambridge and Oxford, and an economic advisor to the governments of his native Poland and other countries. His key insights about the causes of the Great Depression preceded Keynes, but he was not widely recognized for these achievements. (Unlike Keynes, he did not publish mainly in English, was not well-known, and was not connected to elite policymaking circles.) Kalecki is perhaps best remembered for his brief article Political Aspects of Full Employment (1943), in which he argued that full-employment policies would erode capitalists’ power in the workplace and state, and so would be sure to face capitalist opposition. Robert Pollin calls this “probably the most insightful six pages ever written in economics.”

Pollin had said this about him: “Kalecki, of course, recognized this a long time ago, saying you can have a model of capitalism based on repressing workers. (He noted that it’s helpful, if you’re going to do that, to have a repressive fascist government—not that he was advocating doing that, of course.) After a while, and this was in the Financial Times today, workers are going to see that they’re not getting any benefit from a recovery, and it’s going to create all kinds of political results, and we don’t know what they’re going to be. But people are going to be pissed off.”

Paul Krugman’s column today, Phony Fear Factor, mentions Kalecki in a similar connection: how when government creates jobs directly and achieves full employment, it undercuts the ability of “captains of industry” to hold the economy hostage:

The Polish economist Michal Kalecki published “Political Aspects of Full Employment” 70 years ago. Keynesian ideas were riding high; a “solid majority” of economists believed that full employment could be secured by government spending. Yet Kalecki predicted that such spending would, nonetheless, face fierce opposition from business and the wealthy, even in times of depression. Why?

The answer, he suggested, was the role of “confidence” as a tool of intimidation. If the government can’t boost employment directly, it must promote private spending instead — and anything that might hurt the privileged, such as higher tax rates or financial regulation, can be denounced as job-killing because it undermines confidence, and hence investment. But if the government can create jobs, confidence becomes less important — and vested interests lose their veto power.

Kalecki argued that “captains of industry” understand this point, and that they oppose job-creating policies precisely because such policies would undermine their political influence. “Hence budget deficits necessary to carry out government intervention must be regarded as perilous.”

When I first read this essay, I thought it was over the top. Kalecki was, after all, a declared Marxist (although I don’t see much of Marx in his writings). But, if you haven’t been radicalized by recent events, you haven’t been paying attention; and policy discourse since 2008 has run exactly along the lines Kalecki predicted.

It’s great–really great–that Krugman is using his platform to promote and praise Kalecki (I think he’s done it before). But notice that he can’t do it without throwing Marx under the bus (though I guess he could claim that all he is saying is that his younger self was anti-Marxist–which I’m sure was the case). This is par for the course in mainstream economics, which remains McCarthyite–actually more so since the 1970s than in the 1950s, I’d bet! Imagine what the discipline would be like if undergrads and grads were required to study and understand economic history, including ideas from Marx and Kalecki (or even Keynes’s own works). Note also that it is often liberals like Krugman who go out of their way to distance themselves from Marx and Marxists (“I don’t see much of Marx in his writings”), lest anyone think they are flaming radicals.

Comments (12)

Marxism is a discredited combination of early 1800′s Ricardian economics and bizarre historical metaphysics. It does not bode well that so many on the Left cling to one of two pseudo-intellectual ideologies: neoclassical economics or Marxism.

“Note also that it is often liberals like Krugman who go out of their way to distance themselves from Marx and Marxists (“I don’t see much of Marx in his writings”), lest anyone think they are flaming radicals”.

It’s called moral cowardice:

It’s like when one sees the local schoolyard bully harassing the new kid.

Maybe, deep inside, one doesn’t see any reason to the mockery and one knows the new kid has done nothing to deserve the harassment; perhaps one would like to talk to the new kid and befriend him.

But one dares not: lest one become “uncool”.

And then, there are the charlatans who have no balls to admit hating Marx because of Marx’s greatest crime: to say that the rich (and their hired quacks) are parasites.

You’ll never guess what I found in one of the Taylor and Francis papers (Talking About Joan Robinson: Geoff Harcourt in Conversation with John King):

Harcourt: “And Joan, partly in retrospect, saw that the thrust of the attack of Imperfect Competition on laissez faire, and capitalism generally, was showing that it was a system of exploitation, because it discredited marginal productivity. As soon as you had imperfect competition, workers got paid less than the value of their marginal product.” (page 34)

The only difference with what He-Who-Must-Not-Be-Named said is that the much maligned and ridiculed German Bearded One extended this conclusion to perfectly competitive markets.

“Marxism is a discredited combination of early 1800′s Ricardian economics and bizarre historical metaphysics. It does not bode well that so many on the Left cling to one of two pseudo-intellectual ideologies: neoclassical economics or Marxism.”

I disagree. About 75 to 80 percent of what Marx said on economics was correct, and neoclassicalism simply formed in stubborn and petty opposition to Marxism. It literally is “whatever Marx said, the opposite must be true.” The problem with modern day economic thought is that in the Western world’s anti-communist zeal, the real inherent problems of capitalism have been completely dismissed and whole segments of vital economic thought have been disregarded.